GTA housing market had another relatively strong month in May, after a markedly improved month in April. Average home price rose to $542,174, up by 5.4 per cent compared to May, 2012. The MLS Home Price Index (HPI) Composite Benchmark was up by 2.8% year-over-year. full report
Price growth was strongest for low-rise homes, especially single-detached and semi-detached homes. Tight market conditions continued to be the key driver for the strong price increase. Average prices for condominium apartments were also up slightly in comparison to last year.
The TorontoMLS system reported 10,182 sales through the system in May 2013, a dip of 3.4% compared to the hot spring market of May 2012.
"The sales picture in the GTA has improved markedly over the past two months. While the number of transactions in April and May remained below last year's levels, the rate of decline has been much smaller," said Toronto Real Estate Board President Ann Hannah.
New listings in May grew only slightly by 0.7% compared to May 2012. On a year-to-date basis, new listings were down by 7.8% compared to last year.
The Sales-To-New Listings Ratio also indicated a tight market for low-rise homes across all regions, although the condo market is in a more balanced state.
Without larger increase in new listings, housing prices in the GTA should continue to face upward pressure, at least in the short term.
"The annual rate of price growth in May was not surprising given the competition that still exists between buyers, particularly for low-rise home types such as single-detached and semi-detached houses. We remain on track for a three-and-a-half per cent increase in the average selling price for 2013 as a whole," said Jason Mercer, TREB's Senior Manager of Market Analysis.
The Affordability Indicator, which measures the share of average household income that goes toward mortgage principal and interest, property taxes and utilities for the average priced home in the GTA, continued to rise in May and is approaching the 15-year high reached in 2007.
Although it is still within the affordable range, continuing increase in home prices, coupled with increase in interest rates, can push the indicator higher. This can have a dampening effect on the housing market, as homes are becoming less affordable for home buyers in GTA.
Royal Bank of Canada (RBC), one of Canada’s biggest mortgage lenders, has just increased many of its mortgage rates effectively yesterday, June 10. The popular 5-year closed mortgage rate has been increased from 3.09% to 3.29%. Other banks are expected to follow suit.